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You are here: Home / News and updates / Commercial real estate market is making a comeback

Commercial real estate market is making a comeback

August 13, 2013 By Mike Periu Leave a Comment

Commercial real state

The health of the commercial real estate sector in the United States is an important indicator of the condition of the overall economy. Commercial real estate projects suffered a blow during the Great Recession, with financing drying up and existing projects being forced into bankruptcy or distressed sales.  The situation was quite bleak. Recent studies, however, are pointing to a significant turnaround.

According the National Association of Realtors Commercial Real Estate Outlook, commercial vacancy rates are falling and rents are rising. This means that commercial real estate owners can look forward to additional cash flow form their properties.  Importantly, the study also states that over the next year (into 2014) these positive trends are expected to continue.

Investors looking to invest in commercial property should consider acting in the short-term. Sales of properties valued at more than $2.5 million skyrocketed by 24% to $294 billion. During the first three months of this year, that trend continued with an astounding $72.8 billion in large commercial real estate transactions. This represents an increase of 35% over the first quarter of last year. In some markets the change in volume has been extraordinary

A case in point is commercial real estate in Los Angeles which was the second fastest growing market in 2012. Commercial real estate transactions in Los Angeles grew 40% over the previous year and this above-market trend has continued into 2013.  The market also saw vacancy rates trend at below average rates and rents rise above average rates. These trends points to Los Angeles as a potential growth sector in commercial real estate over the next several years.

If you are considering an investment in commercial real estate, it’s important to work with an experienced commercial broker. Many investors are entering the market because they see it as an opportunity to secure appreciating assets that also generate cash flow and in some cases also provided significant tax advantages. But there are many factors to consider and failing to secure expert advice from a seasoned commercial broker could have negative consequences.

When considering a commercial broker to assist you in finding an investment in commercial property, look for the following characteristics:

The broker should be licensed by the state where you plan to purchase. Having a license ensures that the broker has a minimum level of knowledge, has had proper training and must abide by certain ethical standards in representing the interests of their clients.

The broker should have specific knowledge of the market. If you are looking to invest in commercial real estate in Los Angeles, then your broker should have working experience in that market. A recently relocated broker, even one with experience, won’t have the type of real-world in-depth local market knowledge necessary to pick the right investments.

Finally, the broker should have a track record of success in closing deals. The commercial real estate sector has many brokers that have significant market knowledge, but aren’t necessarily able to close transactions. The ability to understand the needs of all parties to the transaction is a critical skill. Being able to push parties to a final close is also important. Not everyone has the ability. You may be close in price, but without a seasoned broker to make the final push to close the deal, you may find yourself out of the deal.

Filed Under: News and updates Tagged With: entrepreneurship, finance

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Mike is a seasoned executive with experience in small business finance and management. He is the founder of Proximo, LLC a leading provider of corporate, consumer and small business education and training services with an emphasis on finance and technology.

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